Take The Risk out of Freelancing

If you’ve joined the world of independent professionals after working in a corporate job for a while, you may find it unsettling that your income fluctuates from month to month.

A little anxiety about this is a good thing. The freelancing lifestyle is a very entrepreneurial one, and if you’re not worried at all about bringing in new business in our current economy, you’re probably too complacent.

That said, there are a few ways to reduce the income insecurity of freelancing and cope with it. Here are some risks to your freelance business and how to prevent them from derailing you.

1. You’re heavily dependent on one or two clients. Securing steady work from one or two customers can be a huge relief, especially if you’re accustomed to a corporate paycheck. But what happens if we hit another downturn and your big customers cut back on the work they outsource? You may find yourself scrambling.

Remedy: Stay open to–and cultivate–occasional clients, too. You won’t have time to work with these folks all the time. But by doing a great job on the occasional project for them, you’ll be in a good position to contact them if one of your main gigs dries up and say, “I just finished a big project and am open to freelance assignments, if you need any help.”

Case in point: I do some assigning for one publication, and there are several excellent nonfiction book writers who contact me between books to pick up some assignments. Their work is always top-notch, so I’m happy to hire them, even though I know they’re not available for steady work. And if their next book proposal took a long time to sell, I’d be delighted to hire them on a more frequent basis.

2. You’re intensely focused on a very small niche. Most successful freelancers I know will tend to cater toward one type of client, but they are willing to branch out. If they’re writers, for instance, they contribute to magazines, websites, blogs and newspapers. This way, if one type of client (for instance, print publications) declines, they will be well positioned to continue earning income in the future.

Remedy: Actively look for work outside of your core niche. If, say, you’re a journalist, consider advertising your availability for editing reports in an area outside of the ones you cover (to avoid ethical conflicts) or ghost writing. Teaching as an adjunct, while not extremely lucrative, can also be a good way to diversify your income stream.

3. Your living expenses haven’t changed since you left corporate America. Earning a six-figure income as a freelancer isn’t the same as doing so as a corporate worker. Your expenses on some things, like commuting and your professional wardrobe, will be lower. But you will have to pay some big expenses out of pocket: health insurance is a big one that tends to go up a lot each year, no matter how little you see the doctor (my family pays almost $30,000 a year!) and dental costs. And there will be no one to match your contributions for retirement savings. That’s not to mention that if you are a 1099 worker, you need to put aside money for taxes throughout the year.

Remedy: Live like you earn a lot less than you actually make–and cultivate friends who also live within their means, so you are not socially isolated a result of doing so. This doesn’t mean you have to make dramatic changes. For instance, my also self-employed husband and I opted to buy a house that was a little smaller than the one I liked more, around the corner, because it would keep our fixed expenses lower. It would have been nice for our four kids to have their own bedrooms–but it’s hardly earth shattering.

There’s a tradeoff, too: We have more freedom, day-to-day, to spend time with our kids. And we don’t have to live in fear that if there’s a sudden, unexpected bill, we won’t be able to pay our mortgage.

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